Meridian Energy says there's a risk it won't reach its full year financial targets due to record low inflows into catchment lakes.
The State-owned power company has reported an extremely dry December in the lower South Island.
Wholesale prices fell in the last three months of 2011.
Meridian says catchment inflows were about one third of normal levels in December.
Meridian's general manager of markets and production Neil Barclay says recent rain has restored lakes to reasonable levels.
Meridian adds that outages relating to upgrades by Transpower on the national grid will also affect trading conditions.
While the company is confident it will meet its half-year financial targets, assuming there will be average rainfall from now on, Meridian says it may not achieve its full key targets.
However, the company says it's well positioned for future growth and to meet rising demand for electricity.
Meridian's underlying profit fell 13% to $219 million in the year to June due to financing costs and increased depreciation charges after revaluing its assets.
The company will report its half-year earnings result on 13 February.
